IHTM14001 - Lifetime transfers: introduction to lifetime transfers

Inheritance Tax (IHT) is primarily a tax charged on the assets owned by a person on their death (IHTM04043). If the tax did not also apply to lifetime transfers (IHTM04051), it could be avoided by transfers of a person’s assets made shortly before death. So, to protect the death charge, IHT can also be charged on transfers:

• made within seven years of a person’s death, or
• where the person who made the transfer continues to enjoy some benefit from the asset, for example by living in a house that they have given away.

In addition, transfers into most types of discretionary trusts, those involving companies, and (since 22 March 2006) transfers into most types of interest in possession trusts are immediately chargeable transfers.

The main categories of lifetime transfers that you will deal with are:

• potentially exempt transfers (IHTM04057),
• deemed transfers (IHTM04025),
• gifts with reservation (IHTM04071),
• immediately chargeable transfers (IHTM04067).